If Your Mortgage Lender Goes Bankrupt,
Don't Panic

Source: Dallas News
Date: January 28, 2008

With all the turmoil that's going on in the mortgage markets these days, there's one question that homeowners don't want to ponder but need to.

What happens if your mortgage lender or mortgage-servicing company files for bankruptcy or goes out of business?

The subprime mortgage implosion has taken down several lenders. Of the top 40 mortgage lenders in 2006, eight went bankrupt or closed in 2007, according to Inside Mortgage Finance, a mortgage-industry publication.

If that happens with your lender or mortgage servicer, don't panic. You have protection under federal law, but you must continue to fulfill your obligations under the loan contract.

A mortgage-servicing company collects, processes and credits your mortgage payment, and handles your escrow account, if you have one. The servicer can be your original lender, but many times it isn't because loans and the rights to service them often are bought and sold.

If your mortgage servicer is different from your original lender and your original lender goes out of business, continue to make your payments to the mortgage servicer by the due date.